High Aussie dollar likely to affect farming and mining industries

Written by Alwyn Davis

Friday, 30 March 2007

The Australian dollar has reached a 10 year high recently, of almost 81 cents against the US dollar. It's also competing strongly against the Yen, Euro and Sterling, indicating its overall strength in the international market.

This has largely resulted from demand by China and India for more and more commodities as their populations grow and become more affluent. As commodities make up a large part of our export base, it has led to increased growth in our overseas trade and the resulting high exchange rate.

The consequences of this rate are yet to be seen, with the Reserve Bank's next meeting set for April 3rd. Although unlikely that they will decide to raise interest rates again, the high dollar by itself will put pressure on farming exports, as they become more expensive for overseas markets to purchase. On the other hand, the demand for commodities pushes up the price of metals such as copper and aluminum.